Selling a Business Post COVID-19

Looking to sell your business?  Maybe it's time to retire or perhaps you have found something more interesting.

The impact of COVID-19 has been particularly hard on a number of businesses. Unfortunately some businesses with fail, while others will adapt, survive or even thrive. One thing for sure is that most businesses will have a large dent in their profitability for a number of months in 2020.

For business owners, staying solvent is top of mind. According to Richard O’Brien, director of Business for Sale website www.nzbizbuysell.co.nz, . “It is crucial that business owners work on how to minimise the impact and take corrective action. This way they have a business that works and is worth selling when that time comes” . The market may have shifted, or your business model may no longer be relevant.  If this is the case take time to decide what the new future looks like and how best to adjust your business.

Depending on the impact to your balance sheet, it is possible the goodwill (the intangible asset) component of your business has been harmed. The value of your intangible assets is based on the owner’s discretionary income over the last few years. To help mitigate against this extraordinary event, business owners need to minimise the impact on profits and show a strong path moving forward.  Smart strategies include adapting your business model to show a more certain future; and having a great recovery plan. Furthermore, it is prudent to work out where the market and money have gone – customers will still be spending, but their needs may have shifted.  Adapt to this and your prospects will be brighter.

This is a difficult time, and news is awash with hard-luck stories. It’s important to keep perspective and focus on what’s important to you and the future of your business. Even in challenging times, there are still opportunities and business is still happening. Your challenge is to make sure your business continues to survive and remains a saleable proposition.

All this can feel overwhelming but there are professionals out there that can help, including your Accountant, Business Mentors and resources like the Governments “Regional Business Partners Network”.  Make use of these resources to create the best outcome.

Once you have attended to your business and have it in the best possible shape, you then need to consider who your most likely buyer may be. Do you have a good customer database or some intellectual property a competitor might be keen to buy? Is the business limping along and needs someone with more energy and capital, or is it likely to be purchased and added to a larger business to make them more viable? Maybe it’s a great launching pad for someone whos looking to buy a job? It could be operating well, having received a small bruise from reduced activity during lockdown, but with no long-term effects.

The good news is there are plenty of active business buyers out there. Some are looking for a bargain or need a job, while others are looking for an add-on to their current business or have just decided it’s time to take charge of their own life.

Once you have the current situation under control, then develop a plan to sell your business.

Key points to consider when selling your business - buyers will be looking for;

• Cashflow,
• Sound systems and
• A business with a future. 
   

Use experts - experienced professionals like Accountants and Business Brokers - to help you through the process and avoid legal, ethical or financial pitfalls.

When valuing your business, determine a realistic price.  Consider your buyer, the market, and the condition of your business. This is generally a job for the experts – and unfortunately in most situations COVID-19 has had a bite of the pie here.

Plan and prepare your business for sale. Increase the desirability of your business to buyers by identifying what they want, and addressing any areas that leak value and are likely to be used to negotiate the price. Ensure all systems and procedures are documented and in place. Make sure the cashflow is good by boosting your sales and minimising expenses. Maximise your turnover and profit margin, and position your business so the future looks positive.

It's desirable to reduce the dependence of the business on you personally. Client dependence on the current owner is often a concern to potential buyers as customers may not remain loyal once the owner has departed.

While it can take time to sell a business, if you have a plan and are prepared, then you are well on your way to selling your business.

For further resources and articles check out the 7 Business Strategies for Uncertain Times and our Business Sellers’ Checklist to help you get a sale and your best price.

Contributed by the New Zealand Business for Sale listing specialists nzbizbuysell.co.nz